PROVIDENT FUND
Employee Provident Fund or provident fund :- is a retirement benefit scheme that is available to salaried employees. Under this scheme, a stipulated amount (currently 12%) is deducted from the employee's salary and contributed towards the fund. This amount is decided by the government. The employer also contributes an equal amount to the fund.However, an employee can contribute more than the stipulated amount if the scheme allows for it. So, let's say the employee decides 14% must be deducted towards the EPF. In this case, the employer is not obligated to pay any contribution over and above the amount as stipulated, which is 12%.
Return on this investment 8.5% per annum
Tenure of investmentThe amount accumulated in the PF is paid at the time of retirement or resignation. Or, it can be transferred from one company to the other if one changes jobs. In case of the death of the employee, the accumulated balance is paid to the legal heir
TAX TREATMENT :The amount you invest is eligible for deduction under the Rs 1,00,000 limit of Section 80C. If you have worked continuously for a period of five years, the withdrawal of PF is not taxed.If you have not worked for at least five years, but the PF has been transferred to the new employer, then too it is not taxed. The tenure of employment with the new employer is included in computing the total of five years. If you withdraw it before completion of five years, it is taxed. But if your employment is terminated due to ill-health, the PF withdrawal is not taxed.
PREMATURE WITHDRAWL : If you urgently need the money, you can take a loan on your PF.You can also make a premature withdrawal on the condition that you are withdrawing the money for your daughter's wedding (not son or not even yours) or you are buying a home. To find out the details, you will have to talk to your employer and then get in touch with the EPF office (your employer will help you out with this).
PUBLIC PROVIDENT FUND
The Public Provident Fund has been established by the central government. You can voluntarily decide to open one. You need not be a salaried individual, you could be a consultant, a freelancer or even working on a contract basis. You can also open this account if you are not earning. Any individual can open a PPF account in any nationalised bank or its branches that handle PPF accounts. You can also open it at the head post office or certain select post offices. The minimum amount to be deposited in this account is Rs 500 per year. The maximum amount you can deposit every year is Rs 70,000.
Return on this investment: 8% per annum
Tenure: The accumulated sum is repayable after 15 years along with the accrued interest
Reinvestment : The entire balance can be withdrawn on maturity, that is, after 15 years of the close of the financial year in which you opened the account.It can be extended for a period of five years after that. During these five years, you earn the rate of interest and can also make fresh deposits.
TAX TREATMENT :The amount you invest is eligible for deduction under the Rs 1,00,000 limit of Section 80C. On maturity, you pay absolutely no tax.
PREMATURE WITHDRAWL :You can take a loan on the PPF from the third year of opening your account to the sixth year. You are allowed to withdraw 50% of the balance at the end of the fourth year, preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.